The Federal Reserve is doing what no military on earth can do. They are destroying the American Republic. Without firing a single shot, they are bringing us down with money. They are printing so many dollars, Americans will soon be using them to wipe their butt.
The Fed injects $85 billion into U.S. markets every month through a program called Quantitative Easing. They are now on their third phase of the program, which is called QE3. The first two phases were limited in dollar amounts and in the duration. However, the current phase, announced in September 2012, has no limits, which is why it is sometimes called QE Infinity.
In theory, it sounds great. The way it works is the Fed’s monthly purchases of treasuries and mortgage backed securities props up the demand, which artificially keeps interest rates low. Lower interest rates are then passed on to consumers to stimulate purchases of homes, cars, and other high-ticket items. Lower rates also allow businesses to expand.
However, there are at least eight ways the Federal Reserve is destroying the American republic:
1. Destroying Free Markets:
America was once the land of the free, but the unprecedented scale of intervention by the Federal Reserve since 2008 has brought an end to the remaining traces of free market capitalism in America. The markets no longer behave like free markets behave. Things like corporate profits and unemployment rates are supposed to drive investment decisions, but they no longer do. Only one thing now drives investment decisions, the Federal Reserve.
Prior to the 2008 collapse of the housing market, most of our government bonds were sold to foreign governments, foreign citizens, and American citizens. The Federal Reserve did not become the largest buyer of our bonds until after the housing market crashed. In the interest of stabilizing the rattled financial markets, they stepped up to the plate and have been buying heavily ever since. They quickly became the biggest buyer, accounting for over half of all bond purchases. The numbers fluctuate but during some months Fed purchases have exceeded 75% of all bonds sold. The point is they have become the driving force in the bond market.
The central bank not only drives the markets, they have become the markets. They have become the dominant force behind the stock market, the bond market, and the housing market. That pretty much covers the whole economy. As a result, the only thing that matters to investors anymore is what will the Federal Reserve do next. Any new data no longer has any inherent value. The only thing that matters to investors is what will the Federal Reserve think about it. How will they react to it? This is unprecedented in American history. It is also irreversible without a major correction, which is about to happen.
2. Stealing Our Future:
When the Fed launched their Quantitative Easing program, their plan was missing an important piece, an exit strategy. We have no historical precedent for what has happened so nobody really knows how to unwind the beast that has been created. The idea was to help the markets stabilize. Then after that was achieved the Fed would eventually wind down their purchases and allow the market to return to normal. That sounded good, and seemed to work great too, at least initially.
After five years of pumping $85 billion per month into treasuries and mortgage backed securities, the Federal Reserve announced at the June 2013 quarterly policy meeting their plans to begin scaling back their support. However, between that time and their next quarterly meeting they abandoned their plan calling it premature. They recognized the data to justify reduced purchases was not there. After five years the patient still has no signs of recovery and must remain on full life-support. What kind of a future is that? America has traded away our future in exchange for a few short years of phony prosperity.
3. Creating Phony Asset Values:
The Federal Reserve is pumping so much money into our markets that it causes asset values to be artificially inflated. Stock prices are inflated as more investors invest more money to ride the wave of rising stock prices. After five years of that, no one knows the real market value of the assets. What would they be worth without the Federal Reserve purchases? Accurate asset valuation has become impossible. This creates confusion in financial markets as no one knows the true value of assets.
Even the Federal Reserve has admitted recently in a statement, “Uncertainty exists about how the market will reestablish normal valuations when the Fed withdraws from the market.” In other words, they now admit they have created artificial asset values and they have no idea how to get back to reality.
4. Putting More Investors at Risk:
The booming growth in the stock market has caused many investors to abandon safer investment products such as certificates of deposit, 401k plans, municipal bonds, and government bonds. The rates of return on those products are far lower than what can be earned in the booming equities market. So there has been a mass migration of capital exiting the safe haven assets and going into risky assets. The added capital inflates the bubble even further. Investors have bought into the idea that the government has complete control over the bubble and will not allow it to burst. Unfortunately, they will soon find out the bubble has a mind of its own.
5. Huge Cost with Fleeting Benefits:
The Fed’s injection of capital into our economy comes at a very high cost that will be passed on to our children. However, the benefits from their purchases are only fleeting. The effectiveness of their tactics wears out after a few years.
Despite all their purchases of mortgage-backed securities, mortgage interest rates are beginning to rise anyway. In the past few months mortgage rates have risen by nearly a percentage point. That might not sound like much but it is enough to cause a measurable drop in demand for mortgage loans as consumers opt to wait and see if perhaps they can get a better rate in the future. The recent rises in interest rates are only the beginning of what we will see ahead.
6. Out of Control Spending:
The Fed’s intrusion into our economy enables our government leaders to be irresponsible, continuing to spend money we do not have. The reckless spending that we see today was not possible when the dollar was tied to gold because there was a limit to the number of dollars available. We could not get more dollars until we got more gold to back it up.
Today the Fed just creates money out of thin air. Sometimes they print more money, like monopoly money. Other times, they just create money electronically without even bothering to print anything. So there is literally no limit to how many dollars they can create. That sounds good until we see we are required to pay it all back.
The Fed uses the monopoly money to purchase U.S. Treasuries from the United States Treasury, providing a major source of cash for the federal government. The Fed’s bond purchases have enabled the federal government to continue spending 40% more money every month than they bring in. If an individual or a business operated that way they would quickly go bankrupt. Our government just adds the difference to the national debt for future generations to pay off. They have temporarily been able to get away with that because interest rates have remained artificially low, near zero, because of the Fed’s bond purchases. However, in the process they have racked up $17 trillion in debt and growing faster than ever.
7. Taxpayers Pay For it All:
The Fed is transferring wealth from us to them. Every dollar they are injecting into our economy must be paid back with interest added. In essence, the Federal Reserve is transferring wealth from the American taxpayers to their own balance sheet. And what do the American taxpayers get in return for that payment? We get the right to have currency. But doesn’t the government provide our currency? For most of our nation’s history they did. Back in those days, the government provided our currency without any need to pay interest on it to anyone, but in 1913 that role was handed over to a private bank, the Federal Reserve. The Federal Reserve Bank has only existed for the past one hundred years. Before that our nation prospered just fine without it.
8. Destroying the Dollar:
Perhaps the greatest crime committed by the Federal Reserve is their destruction of the American dollar. Since 1948 the dollar has been the world’s reserve currency. Dollars are still accepted almost anywhere in the world, but those days are numbered. Since the 2008 economic crisis, the Fed’s printing binge has driven the value of the dollar into the ground. Other countries have been forced to devalue their currencies to maintain competitive prices for their exported products.
Even before the 2008 crisis, the Federal Reserve has been very bad for the dollar. Since the Federal Reserve was created in 1913, the dollar has already lost 96% of its value. The small remaining value is now in great danger.
Warnings from Our Forefathers:
Thomas Jefferson warned us about the dangers of having a central bank when he said, “I sincerely believe that banking institutions are more dangerous to our liberties than standing armies. The issuing power should be taken from the banks and restored to the people to whom it properly belongs. If the American people ever allow private banks to control their currency, first by inflation then by deflation, the banks and corporations that will grow up around them will deprive the people of all their prosperity until their children will wake up homeless on the continent their fathers conquered.”
President James Madison warned, “History records that the money changers have used every form of abuse, intrigue, deceit and violent means possible, to maintain their control over governments, by controlling money and its issuance.”
In 1834 President Andrew Jackson said, “If Congress has the right under the constitution to issue paper money, it was given them to use themselves, not to be delegated to individuals or corporations… The bold effort the present bank has made to control the Government, the distress it has wantonly produced…are but premonitions of the fate that awaits the American People should they be deluded into a perpetuation of this institution (The Bank of the United States), or the establishment of another like it.”
Abraham Lincoln warned us “The ‘money power’ will endeavor to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in the hands of a few, and the Republic is destroyed.”
Conclusion:
America must return to a system that holds our government accountable for every dollar spent. When the dollar is backed by gold the government is forced to stop spending money because they reach a point where there is no more gold to back it up. Returning our currency to the gold standard also eliminates the need for a central bank.
Having a central bank has never been in the best interests of the American people. It has only been in the best interests of a few wealthy bankers. This private organization is like a leach sucking the life from our nation. It is time for the Federal Reserve to go before our republic is completely destroyed.
Author: James Bailey
James Bailey is a blogger, business owner, husband and father of two grown children. In 1982, he surrendered his life to the Lord Jesus Christ. In 2012, he founded Z3news.com to broadcast the message of salvation by reporting end time news before it happens.
Not much has changed (other than to get worse) regarding all that Mr. Bailey has said and warned about.
If you, Mr. Bailey, want to increase the strength of this article – then update it (it’s now 2015 and the debt from exotic derivatives especially related to the oil-field industry for the exploration and development by the shale oil companies borrowing, their banks engaging in credit default swaps, etc] have increased the danger of a 2007/08 type meltdown exponentially) – AND THIS TIME – include reference sources for your quotes from Andrew Jackson, Lincoln, and James Madison and any new that you add.
The Federal Reserve: Destroying the Middle Class and Life as We All Know It
As America approaches the fiscal cliff commencing January 1, 2013, an assessment of the historical effectiveness of the Federal Reserve’s (Fed) monetary policy is critical to understanding the gravity of this imminent financial crisis. Government debt together with the Fed’s creation of money has kept the U.S. economy from collapsing to this point, but all American’s must ask themselves if they are truly better off today or if the problems were only escalating problems to monstrous proportions, and deferring them to future generations.
The Federal Reserve was formed to promote sustainable economic growth by: stability of prices to help preserve the purchasing power of the dollar, moderate long-term interest rates, ensure high levels of employment, and overall, make sure the U.S. has a sound banking system and healthy economy. It is clear that the Fed is not delivering on these objectives today.
Although there have been small signs of improvement since 2008, the U.S. economy is far from achieving a level of sustainable growth, and is being held back by a number of concerns. The dollar has been on a downward trajectory for years; unemployment and underemployment has become a chronic problem since the financial crisis of 2008; and banks are still fraught with toxic assets with tight lending policies. Also consumer prices are controlled but there are valid concerns here as the methodology of calculation understates true inflation. The risk of high inflation, as more than $2 trillion has been injected into the banks by the Feds, is becoming more pronounced with each QE announcement. A deeper look is required.
The Fed is based in Washington DC and is the gatekeeper of the U.S. economy. It is made up of a network of 12 Federal Reserve banks and a number of other branches, all of which are overseen by the Fed Board of Governors. Other than the appointment of the Chairman and Board members by the U.S. President and Senate, the Fed is intended to be an independent, non partisan entity, free from political pressures. The Feds powers has expanded over the years, gaining more significant responsibilities, including putting out an ongoing economic policy statement. Since the financial crisis of 2008 they have been more involved and relevant in the U.S. economy than ever before.